Separate PM for J&K remark: Twitter spat between Gambhir, Omar – Times of India
Separate PM for J&K remark: Twitter spat between Gambhir, Omar – Times of India
April 2, 2019
Trade Setup for Wednesday: Top 12 things to know before Opening Bell – Moneycontrol.com
Trade Setup for Wednesday: Top 12 things to know before Opening Bell – Moneycontrol.com
April 2, 2019
RBI Can’t Issue Umbrella Directions To Banks To Initiate Insolvency, Says Supreme Court – BloombergQuint

Having dealt with implications of Feb.12 circular for banks, the court then delved into the impact on non-bank financial services companies, which were also impacted by the regulator’s directions. This because the regulator had also relied upon section 45L of the RBI Act to pass the circular. This section gives the regulator power to issue directions to financial institutions.

In issuing any directions under this section, the provision mandates the RBI to have due regard to the conditions in which, and the objects for which, the institution has been established, its statutory responsibilities, and the effect the business of such financial institution is likely to have on trends in the money and capital markets.

The lack of this “due regard” by the regulator in its Feb. 12 circular was another reason for the apex court to have held it ultra vires.

The court noted that RBI circular doesn’t mention that due regard has been given to the issues prescribed under section 45(L)(3). It pointed out that circular applies to NBFCs since they are usually part of the lenders’ forum which jointly lend money to debtors. And since they are inseparable from banks, the 12 circular cannot be applied to them alone.

And so, the apex court declared the circular ultra vires as a whole. Consequently, all actions taken under it, including actions by which the Insolvency Code has been triggered must fall along with it, the order concluded.

Watch this discussion with Senior Advocate Sajan Poovayya and Nilang Desai, partner at AZB & Partners.

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